Adobe Stock Call Options Cheap After Earnings Beat

ADBE options traders have preferred calls over puts

by Patrick Martin

Published on Dec 15, 2017 at 9:57 AM
Updated on Jun 24, 2020 at 10:16 AM

Adobe Systems Incorporated (NASDAQ:ADBE) is up 1.1% to trade at $179.67, after the Creative Cloud parent reported fiscal fourth-quarter earnings and revenue that exceeded analyst expectations, and boosted its current-quarter profit forecast. Analysts have taken notice, with no fewer than nine brokerage firms raising their price targets, including BMO to $205 from $187.

It's been an excellent year for ADBE stock, which has tacked on nearly 70% in 2017 and touched a record high of $186.27 on Nov. 28. The shares' rising 60-day moving average has contained any pullbacks since mid-October, and coincides with another key technical level for the Photoshop maker. Furthermore, the equity has outperformed the broader S&P 500 Index (SPX) by more than 10 percentage points during the past three months. 

Options traders have preferred calls over puts at an unusual clip amid the stock's uptrend. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ADBE's 10-day call/put volume ratio of 1.70 ranks in the 76th percentile of its annual range.

And despite the stock's technical strength, call options are relatively cheap compared to their put counterparts, with ADBE's 30-day implied volatility skew of 38.2% ranking in the 99th annual percentile. Plus, the equity's Schaeffer's Volatility Scorecard (SVS) of 85 suggests the software name has consistently rewarded premium buyers over the past year by making bigger-than-expected moves on the charts.


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